The annual federal budget will be presented March 28, and this year, Canadians can expect a focus on clean economy and social support for low-income Canadians. Ahead of Tuesday’s announcement, the editorial board has analyzed six major fiscal issues.
The growing generation gap between what Ottawa spends on older and younger Canadians
About half of all new federal spending between this fiscal year and fiscal 2028 will go to pay for the rising cost of elderly benefits. But this does not make sense, from a fiscal view or one of generational fairness. Unlike the Canada Pension Plan, which is fully funded by previous and continuing contributions, money for elderly benefits comes each year from current taxpayers. That means today’s retirees, when they were working, supported a much lower level of elderly benefits compared with today’s workers. And today’s retirees enjoyed much lower costs for education and housing compared with today’s younger people.
More on the growing generation gap between what Ottawa spends on older and younger Canadians.
Ottawa must support child care
A national subsidized child-care plan is one of the signature achievements of the Trudeau government. Two years ago, the Liberals announced $27.2-billion in cumulative funding over five years. That amount was essentially unchanged, at $27.5-billion, by the time of the 2022 fall economic statement last November. But inflation projections had jumped significantly, and higher-than-expected inflation eats away at the purchasing power of Ottawa’s child-care dollars.
More on why Ottawa must support child care.
Ottawa should give provinces more tax room, not a blank cheque, for health care
The Canada Health Transfer – which is the amount Ottawa sends to provinces and territories for its share of health care spending – is one of the single largest line items in the federal budget. But Ottawa needs to get out of the way and give premiers more fiscal room to raise revenue to pay for health care. The way to do that is to reduce federal taxes so provincial taxes have room to grow, if they need to. The mechanism for that is what is known as a tax point.
More on why Ottawa should give provinces more tax room, not a blank cheque, for health care.
Canada’s indefensible military spending
Over the past four years, the gap between Canada’s actual defence spending, as recorded by NATO, and the amount that would be required to hit 2 per cent of GDP has risen to $21-billion from $17-billion. Even more damning is the fact that Canada is by far the lowest NATO contributor as a share of GDP among Group of Seven countries. It comes down to a choice for Ottawa: spend less on some programs so that more can go to defence. That’s what writing a federal budget is all about – prioritizing. And right now, in the world we live in, the Trudeau government patently has its priorities wrong.
More on Canada’s indefensible military spending.
The Liberals need to end their hiring spree
Personnel expenses consume half of Ottawa’s operating budget, and yet there has been little effort made to demonstrate whether this has improved program effectiveness. Canadians who have recently struggled to access federal services such as passports or immigration applications could reasonably conclude services have not improved in step with the growth in employment. And with the economy forecast to stagnate this year, Budget 2023 is a moment to rein in the growth of government.
More on why the Liberals need to end their hiring spree.
The Liberals’ reckless deficit of choice
Budgets are about deciding where to spend, and just as important, where not to spend. The government’s fall economic statement forecast cumulative deficits of $69.4-billion from the coming fiscal year through to fiscal 2028. According to the most recent projections from the Parliamentary Budget Officer, those cumulative deficits have nearly doubled, to $112.7-billion. And that is before Finance Minister Chrystia Freeland tacks on extra billions of dollars of definitely-not-reckless spending in Tuesday’s budget.